Mia Constable, Head of Business Development – e2e Total Loss Vehicle Management, reviews the recent webinar hosted by e2e and Insurance Post regarding the use of reclaimed parts in the motor insurance industry.
The webinar involving insurer and bodyshop representatives identified that there was a significant amount of common ground in relation to the benefits of reclaimed parts and the current barriers to wholesale take-up of the solution across the motor insurance industry.
Reclaimed parts were acknowledged as a cost-effective, environmentally friendly solution. They can help to reduce motor claim costs, avoid parts delays leading to log jams in bodyshops, support ESG carbon reduction targets and improve customer experience with reduced claim life cycles and fewer total loss outcomes. In relation to indemnity, using a part from a vehicle of the same age or younger is returning the policyholder to their pre-accident state. In fact, it’s the standard approach taken to motor claims repairs elsewhere in the world. But, until relatively recently, the UK only carried out repairs using new parts. It’s fair to say that is changing, but still relatively slowly when considering claims inflation, extended key-to-key times and associated credit hire costs and the very real threat of carbon taxation on the agenda at COP27 this coming November.
Encouragingly, it was agreed that the use of reclaimed parts in motor repairs was not typically generating negative reaction or challenge from policyholders. It is key, however, that insurers and bodyshops make sure they get the customer benefit messages across to policyholders clearly and consistently. There were a number of messages that it was felt would resonate with policyholders. These included: using reclaimed parts controls repair costs which in turn helps to keep motor premiums lower; reclaimed parts are safe; reclaimed parts are readily available, meaning vehicles can be repaired and back on the road more quickly; reclaimed parts generate less Co2 and greenhouse gases than manufacturing new parts, so help to protect the environment. Inevitably, the more insurers include the use of reclaimed parts in their policy wording, the more consumers will come to expect and accept this approach.
The traditional bodyshop contracts with their insurer work providers, designed around payment for parts and labour, were also called into question and identified as a potential barrier. In this scenario, the bodyshop, which is required to source and fit the reclaimed part, does not always benefit from the value created; at a time when its profit margins, capacity and resources are already squeezed. And yet, the bodyshop is fundamental to the successful adoption of an insurer’s reclaimed parts strategy. A review of contracts considering increased labour rates or fixed fees affording the bodyshop the flexibility to source new or reclaimed OEM parts and benefit from the typical 70% cost savings on RRP associated with the latter requires consideration. In this way, all parties involved in the process, insurer, repairer, vehicle recycler and customer, benefit from the approach.
All parties agreed that technology was a major barrier to increased, wholesale use of reclaimed parts. Insurer, bodyshop and vehicle recycler technology is fractured and must be addressed. Consistency and connectivity are needed across industry processes and systems. Only then can wide-scale industry adoption of reclaimed parts become commonplace and the process future-proofed. Integrating availability, cost and location of reclaimed parts into the front end of the FNOL and repair estimating process is crucial to success. This will unlock the repair savings across a motor book of business, expedite the repair process and reduce the number of vehicles being classified a total loss when they can be economically repaired with reclaimed parts. A centralised system allowing the free flow of information through the motor claims journey between insurer, repairer and recycler would allow for increased efficiencies for all parties. Currently, lack of connectivity and disjointed processes lead to time-consuming part searches, often involving multiple re-keying of data culminating in a breeding ground for failure demand and supply chain friction.
Achieving this joined-up approach requires collaboration from all parties. Desire for the beneficial outcomes is undeniably apparent from all parties. And there’s a real sense that the time for talking is over. So, let’s collaborate, explore the options and drive some action!
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